A mentor always tells me; If you want to be a successful investor, learn to be a rich investor.
He always says that “poor investors can only last a little time and can only make a little dime.”
And he was right.
I’ve always been a poor investor myself, until I started to learn the ropes afresh.
The most profound thing I learned is that most investors start out as poor investors.
You know, the majority of us are born with bad financial habits.
You either have to be schooled or nurtured into becoming a rich investor.
And that takes time, discipline and a lot of practice.
Over time, I’ve learned in my own small way, a few differences between being a rich investor and being a poor investor.
I’m still in transition myself, but in this article, I’ll be sharing some things I’ve learned along the way.
Risk Vs No Risk
All investors are risk conscious.
But while some are risk averse, some are able to manage risk and make profit despite the presence of risk.
The biggest difference between a rich investor and a poor investor is that a rich investor can afford to lose while a poor investor most times cannot afford to lose.
Most times, a rich investor is investing from their excess cash while a poor investor invests from their last cash.
In this case, since a rich investor can afford to lose, they are able to think clearly and make sound investment choices despite the risk involved.
The poor investor on the other hand makes investment decisions based on the risk involved. They allow themselves to be emotionally swayed by the associated risk, thereby making poor investment decisions.
Investing for Control vs No Control
The rich investor usually makes an investment based on the amount of control they could have or the amount of leverage they could enjoy.
They want to have some form of control so that they could either improve their investment position or pull the plug when something goes wrong.
A poor investor on the other hand does not consider control a big factor in making investments.
Since their sole aim is just making money, they are easily swayed and trapped into closed investments that most times culminate in a dead end.
Patient Vs Impatient Capital
The rich investor sees every investment like a business. They know that it takes time for a business to grow and reward its investors.
Hence, they mostly employ patient capital to invest in projects with great prospects and reasonable timelines.
The poor investor on the other hand is always in pursuit of quick gains. They want to put in their money and cash out ASAP.
Hence, they are always attracted to HYIPs, dubious projects and fly-by-night schemes.
While the rich investor patiently waits for his dividends while tinkering with the investment controls, the poor investor lives and dies on the fast lane; constantly in hot pursuit of the next quick investment opportunity.
Capital Gains Vs Cash Flow
The biggest secret of a rich investor is that they are not only looking to make a ROI.
They want other derivatives for their investment.
They want dividends, cash flow, paper assets, high-value network, etc.
They are not just investing for capital gains. They are putting their money to work so that they could have leverage in many ways.
The poor investor on the other hand just wants to make a return on their capital as quickly as possible.
Their plan is to make a reasonable ROI on as many investments as possible.
Take for example, in real estate investment, while the rich investor takes the time to find the right opportunity that gives him reasonable equity, the poor investment stays on the surface and is satisfied with a fixed-income portfolio.
If that real estate investment makes 20 million per year and the rich investor has a 20% equity, they’d be making 4 million per year cash flow for life.
On the other hand, the poor investor who gets a 20% ROI deal would get a one-time return of 20% of whatever he invested.
If both investors invested 1 million Naira each, the rich investor would be getting 4 million Naira per year throughout the lifetime of the project while the poor investor would get only 200k Naira one-time payment.
A Stronger Reason for Investing
Has anyone ever told you that their business or investment is all about the mission?
That person is probably a rich investor.
While rich investors want to make money from their investments, they would only support reasonable projects with strong missions.
A rich investor would never invest in projects sponsoring terrorism or those harmful to the environment or climate.
Instead they scrutinize investment opportunities to find ideas and teams with great missions and the best of intentions.
You would mostly find rich investors investing for impact or supporting communities, teams or causes.
On the flip side, a poor investor just wants to make money in whatever way and in whichever means possible.
As long as they make a return, a poor investor doesn’t care if the world is burning down.
They would often invest in fraudulent projects, morally bankrupt teams, or questionable causes.
No matter if it is black money or blood money, a poor investor just doesn’t care as long as they get paid.
Conclusion
My biggest investment lesson so far is that investing is not a game.
If you want to grow as an investor, you have to stop looking at investing like a game where you either win or lose.
Instead, start looking at investment like you would a project that needs your financial and human resources to grow.
There could be upsides and downsides, but there will always be potential to create massive wealth by investing in and supporting great projects.